COLUMN: American middle class growing poorer

You've no doubt heard about our widening gap between the rich and the poor. But did you know that the gap between the rich and America's middle class is growing almost as fast?

The Center for Budget and Policy Priorities and the Economic Policy Institute have studied these gaps.

In 15 states, our most affluent 20 percent averages over eight times the income of our poorest 20 percent, the think tanks explain in their new report, "Pulling Apart." In the late 1970s, not one state had a top-to-bottom ratio that large.

After adjusting for inflation, the nation's richest fifth of households have seen their incomes rise an average $2,550 each year since the late 1970s. Average incomes in the nation's bottom fifth have increased just $1,330.

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And incomes for the households in America's middle fifth? In all 50 states, the gap between the top 20 percent and the middle 20 percent has widened. The gap between the middle 20 percent and top 5 percent has widened even more.

In New York, inflation-adjusted incomes for the state's middle fifth of households increased by just $14,118 between 1979 and 2007. Over that span, the top 5 percent's incomes soared by $193,877.

All these figures understate the real gap between our affluent and everyone else. The data come from surveys the Census Bureau conducts. These surveys don't take into account income from capital gains, the profits from buying and selling assets.

Capital gains income flows "overwhelmingly" to America's most affluent. In 2012, 87 percent of all capital gains "will go to families in the top 5 percent of the U.S. income distribution." The gaps would be substantially wider if it took this income into account.

But do these gaps matter? The researchers have a clear answer. Rising inequality, they contend, "adversely affects our economy and political system." The most basic problem with growing income gaps? They eat away at our social cohesion.

In a democracy, civics textbooks tell us, people come together to discuss, debate, and decide solutions to common problems. But this democratic deliberation only works when people have problems in common. In deeply unequal societies, the rich live apart, in their own private universes.

These wealthy people become increasingly isolated from poor and middle-income communities. One example: They send their children to private schools and "lose sight of the need to support public schools."

"As a result," the report explains, "support for the taxes necessary to finance government programs declines, even as the nation's overall ability to pay taxes rises."

The encouraging news? We may still have gridlock in Washington, but states, individually, can take steps to reduce inequality. States can enact minimum wages higher than the federal minimum wage rate. They can de-emphasize sales taxes and rely more on taxing the income of ultra-wealthy households.